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David Wolman on "The End of Money"

Jim Fleming: The End of Money. That's the title of David Wolman's book on what he sees as the coming cashless society. So, I'm curious. How close are we?

David Wolman: Not quite yet. I would like to argue that we are in the twilight of cash and I am trying to generate some interest in or at least some scrutiny of cash as a method of payment and as a national obsession, but we don't quite have the perfect substitute yet that's as universally accepted and as speedy. Uh, so, I don't want to rush things and be too fool-hardy with my examination and my kind of disquisition on the future of cash and the questionable future of cash. But, I do think that it's sort of a death by a thousand cuts situation but we just don't know yet if we're at cut number 872 or 941.

Fleming: [chuckle]

Wolman: But, we're getting there.

Fleming: I think what's surprising to the reader of The End of Money is to discover just how many alternatives there are to the kind of transaction that we've been talking about, the, uh, the cash. You've found all sorts of people and I think one of my favorites was, and I hope this is a made-up name, Bernard von Nothaus?

Wolman: Bernard von Nothaus. That's his name. He is, uh, an alternative currency engineer. He calls himself the monetary architect; however, the Federal government calls him a domestic terrorist . . .

Fleming: [chuckle]

Wolman: . . . because, uh, he, uh, created and began issuing something called the liberty dollar and then later the Ron Paul dollars and he is one of these, uh, sort of, gold bugs to the extreme who believe that money is only money if it has a physicality to it like real silver or real metal, uh, and real gold, etc. So, von Nothaus ran into trouble with the government because his coins look a lot like coins made by the US Mint; however, his story on the surface sounds very zany. Uh, he's this kind of larger than life character. He's a real counter-culture throwback who lives in Hawaii and founded the Church of Marijuana of Honolulu, and, uh, he talks about once driving a truck into the hotel, into a hotel lobby, and he has these incredible kind of stories. He's a wild guy to hang out with and the liberty dollar in-, adventure sounds kind of ridiculous on the surface and yet what I found is that when you scratch away a little bit, what von Nothaus went through and is still going through, he's still waiting to be sentenced, actually raises some very fundamental questions about what is money, what is currency, what is government-issued currency, and how much innovation with currency is permissible because we have all kinds of . . .

Fleming: You know one of the . . . I'm, I'm sorry to interrupt, but what, I, I think we have to talk about what the, the liberty dollar is because actually, I found that what he was doing it, uh, with it, as you were describing it didn't sound that nutty after all. He was printing something that looked more or less like a dollar, that he called a dollar, that he used as a dollar, and if he said, uh, I'll sell it to you for 80 cents, then you can use it as a dollar. Well, as long as everybody agrees with that, what's so nutty about that?

Wolman: Right, well some of the laws that he ran into are quite dusty and [chuckle] quite arcane and one of them is that you are not allowed, I'm not going to get the, uh,the precise wording correct here, but you are not allowed to manufacture notes or coins in semblance of US fiat paper or metal money greater than the value of $5 or something to that extent. So he ran into a very, uh, very specific counterfeiting rule. Then, he also ran into some trouble because he was advertising the liberty dollar as competition to US fiat currency and that seems to have been a real problem for federal prosecutors. And what's interesting, and I tried to get into in the book is, where is the line because there are Ithaca hours and there are Berk shares and there's, uh, there are alternative currencies here in Oregon and in northern California, in London, there's one called the Braxton pound, and these are completely legal and legitimate as long as you don't use them to hide income, for example, from the IRS and, uh, a couple of other pretty straightforward rules, you know, especially, don't make it look too much like a greenback. If you obey those rules, then these things are legitimate currencies. They don't have the aura of officialdom that we have assigned to Federal Reserve notes and coins from the Mint but they're legal and so what I wanted to do with von Nothaus' story is explore on the one hand, just the psychology of monetary architecture. I mean, it's one thing to be, curious in what gives money value and what is currency, but then to actually go out and say, well, you know, I don't really like the system as it is. I think I'll [chuckle] try to innovate an entirely new approach. I, uh, I think there's a lot of gumption there and that's an interesting person period and then also, I wanted to explore, what is the legal situation here. Is this guy, and is the guy [chuckle] maybe going overboard to, uh, prosecute this guy so aggressively?

Fleming: And he brings up the point that money's a fiction. Too much faith in it can bring your downfall. In, in fact, your chapter on Iceland, uh, illustrates that perfectly. They put all their faith in their money and went under.

Wolman: Exactly. So, during the financial crisis, Iceland had, what is by dollar value and per capita, the greatest banking collapse in the history of humanity and one thing that was interesting about my reporting adventures, you know, bouncing between Tokyo and Iceland and India and Hawaii and is that you can see people's attitudes about money and currency and even the headlines in the newspapers shifting so dramatically about these issues over the course of 12 or 20 months. And what I mean by that is, in the wake of Iceland's banking collapse, everyone was talking about how Iceland really needed to get on the euro because nobody wants an Icelandic krona. It doesn't hold value. No one else is investing in it, why on earth do these tiny little countries, the Malawi kwacha, etc, why, the Thai bot, why do these countries have their own small currencies when really they should piggyback on some larger ones, be it the euro, the dollar, etc. Well then you fast forward 10 or 15 months and you have the euro crisis and now Iceland is feeling really good that they, uh, that they have their krona and they are not subject to the decisions being made in Frankfurt governing the fate of the euro. And, what I like about that is it's a reminder again that even though we think of our currency and the monetary system as kind of unquestionable and it is what it is and it works fine, you know, this is very tentative stuff and very fragile stuff that has not actually been around for that long and, you know, I, [chuckle] I'm by no means an anarchist or anything like that, I think these are systems that we need to protect before we meddle with them too much. But it is an important rider, you know when I went to Iceland, our attitudes about the currency, let along physical money are very movable.

Fleming: And, yet I am as you suggest, confident that the money the organization pays me is going to go to the bank and be honored and when I make a transaction the people I do that with are going to honor it as well.

Wolman: Right, and in wealthier countries, of course, now most of our financial lives involve electronic money, or money in electronic form however you'd like to describe it, and the fact is that the wealthier you are, the less of a problem this is. And, the more serious pivot is talking about this issue of cash being the enemy of the poor and what I mean there is you're getting paid by your employer. You're, electronically, the money goes into the bank. You're earning interest perhaps in the bank. You are establishing good credit, then you can get a loan for, to launch a small business or to send someone to school or to get a mortgage, it's all the old-fashioned boring stuff about banking that we haven't really been thinking about of late because we have a lot of problems with wall street and collateralized-debt obligations and other adventures. But, the old school style of banking is, uh, is, a great kind of social service. It helps us protect our wealth and when you're stuck using cash like two billion plus people on the planet, you're excluded from the formal economy, and that doesn't mean the formal economy in the sense that I, oh, I want you to go use a Visa card, you know, this book is hardly a valentine to the credit card industry. It means the formal economy in that sense of getting connected to banks and earning a paycheck so that your savings can be protected in a bank and not stuffed under a mattress where someone could steal it or you could lose it in a flood. And, uh, this was a real revelation for me as someone who's not a development or economics expert to delve into this idea that cash is really expensive and cumbersome and problematic for the poor.

Fleming: Well, and it does raise the question of, of how they would get along if cash were to disappear because they don't have, at this point in our economy, any way to transact business without except by saying, I'll carry out your trash if you'll give me a sandwich.

Wolman: Right, and barter, you know, barter we don't want. Barter is not going to help anybody, sort of, buttress against future financial shock and climb out of poverty. What we need is the ability to establish savings, and what we're seeing actually because of mobile phones, a fantastic way to carry this out. It's still very early in this process, but some of the programs that I talked about in India, in Africa, and elsewhere, especially in the developing world, these companies are using mobile phones as a way for people to store and send money and then, even to send, send money to each other and then to send it to a bank. And this is helping them, kind of, leapfrog over the need for, let's say, ATMs everywhere or bank branches everywhere, which frankly the banks are never going to go for any way because there's no real incentive for the banks to establish a bricks and mortar building in the slums or in the jungle. What you need is a way for people to store their wealth, their savings, electronically so that, again, they're not subject to the usurious rates of local lenders or this idea of hiding money under a mattress only so that a drunk family member can steal it or losing it in a flood, etc. One example, and really the prime example, is in Kenya, there's this program called M-Pesa, m for mobile, pesa for money. And with M-Pesa, I think, they're now up to 13 or 15 million users in this program and the traditional banking sector, by comparison, it took them a century to get five million customers in Kenya and now you have people there who work, let's say in Nairobi, who used to have to spend two days each way riding the bus to deliver some money to a relative in the countryside who needed it badly. And now what they can do is just, essentially, send a text message to that relative, you know, saying there's $100 waiting for you. Go to the local kiosk where you can, essentially, extract it and cash is still part of that exchange but in these early days, we're seeing how cash is being pushed further and further to the periphery.

Fleming: David Wolman is the author of The End of Money, counterfeiters, preachers, techies, dreamers and the coming cashless society. Wolman is also contributing editor at Wired magazine.